Building an ethical workplace is a key component of running a successful business. Ethical issues can not only cripple internal operations, but can also effectively kill all of the consumer credibility your marketing dollars have been spent to create. Ethical violations in the workplace tend to make the news when they involve nationwide or multinational corporations, though smaller businesses need to keep an eye out for these issues as well.

We’ve all heard about the insider trading, the falsified earnings and that imaginary inflation that ballooned various markets in recent history, but on the smaller scale, employee theft, falsified expense accounts, improper recording and lying to customers have remained a constant problem for employers of any size. In fact, the Ethics Resource center reports that, over the last two years, 45% of employees have witnessed unethical acts in the workplace.

Benefits of an Ethical Workplace

These unethical actions erode the solid foundation companies have worked hard to build and can lead to more serious problems in the future. However, companies that can successfully build ethical businesses enjoy a host of profit-building benefits, including:

Public prestige – Ethical companies attract discerning and loyal customers, which translates into more sales and higher profits.

Smoother operations – Without ethical snafus, business can concentrate on building business; not on punishing the guilty and spinning public backlash.

Why is It So Hard to Be Ethical at Work?

If building an ethical workplace is clearly the best option for businesses, why do so many companies struggle with the task? There are a number of different reasons, but they all ultimately boil down to a few overarching themes:

Personal greed – Unethical employees (management or otherwise) seek to get ahead, line their pockets or punish their bosses because of real or imagined sleights. Worse yet, The Association of Certified Fraud Examiners recently reported that fraud – large or small – exists on average 18 months before it’s even discovered!

Unrealistic goals – Employees don’t bear all the responsibility for dishonesty in the workplace. Thomas DiNapoli, the head of The Office of the State Comptroller for New York, says that unrealistic goals set by employers are one of the biggest motivators behind unethical actions. Whether these shady activities take the form of falsifying numbers or lying to potential customers, the pressure to achieve can lead individuals to do stupid things.

Existing culture of complacence – Employees are unlikely to change if they come into an existing culture that accepts unethical behavior. It’s basic human psychology – authority, even if merely assumed, can cause otherwise ethical individuals to do incredibly immoral things. Yale University psychology Stanley Milgram became famous for his experiments in which he discovered people will actually opt to inflict pain – even to the point of death – on other individuals if an assumed authority figure is present and fails to intervene.

How to Build and Ethical Workplace Easily

With all of these hurdles to overcome, building an ethical workplace may feel like pushing a boulder uphill. But there are a number of easy things you can do to create a culture moral propriety and help employees behave better. For example:

Create a codified ethics policy – Research has shown that companies with such plans in place have higher employee responses to unethical behaviors. Such plans should lay out what unethical behaviors are, how to report them and what exactly the penalties are for breaking established rules.

Encourage employee reporting – Your employees must be able to speak up about unethical behavior – no matter who is at fault. The Ethics Resource data shows that last year such reporting was at an all-time high of 65%. However, 1 in 5 of those employees said they suffered some sort of retaliation. If you want your employees to work with you – not against you – ensure that reporting is easy, safe and secure. Even consider offering an anonymous reporting system if necessary.

Ease off the unrealistic goals – Set more realistic goals for your employees (especially your sales teams) and allow for employee feedback. Stress leads individuals to seek “the easy way out.” Don’t let it push them over the ethical line.

Punish or modify unethical behavior – Once you have an ethics plan in place, it must be enforced. Punish exposed behavior according to your plan. Punitive measures (at least for relatively minor offenses) should be met with an educational component. Serious infractions should result in serious penalties – no matter who is involved.

Set an example – As with everything else, building an ethical workplace begins at the top. You and your senior management need to be open and accountable on all issues, just as you expect your employees to be.

The key to building an ethical workplace is to envision how you want your company to operate and to put a plan in place to get there. By reinforcing good behavior, weeding out unrepentant and/or corrupt employees and creating a true open-door culture, you’ll your business up for success – now and in the future.